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How Can I Avoid Scams that Target the Elderly?

Key Points

Exploitation is on the rise and costs seniors more than $2.9 billion annually.

There are a number of reasons why seniors are vulnerable, including changes over the years in the way retirement plans are administered.

Talking with loved ones and a trusted financial advisor is one of the best ways you may be able to protect yourself.

Dear Carrie,

I’m 72 and I’ve been hearing a lot lately about scams targeting the elderly. I feel like I’m vigilant and have my guard up, but I still worry that I might fall for one of these schemes. How can I protect myself?

—A Reader

Dear Reader,

I’m glad to hear that you’re thinking about how to protect yourself. I’ve heard so many stories from friends and colleagues about family members becoming victims of this kind of exploitation, and it breaks my heart every time. People work hard to earn their money and accumulate wealth, and it’s not right that they’re getting cheated out of it.

One thing that really concerns me is the enormous size of this problem. The number of reported cases is growing and a recent report by the Securities and Exchange Commission (SEC) estimates that between 2.7 and 6.6 percent of seniors suffer from financial exploitation every year.1 But most people think that those numbers are low. For every case of elder financial exploitation that is documented by authorities, another 44 go unreported.1 Seniors lose at least $2.9 billion annually from this kind of fraud.2

The other scary thing is that this can happen to anyone; it doesn’t matter if you’re rich or poor, educated or uneducated. People simply become more vulnerable as they age. But you can take steps to help safeguard yourself and your money, and I’ll share a few ways for you to do so.

Why you’re vulnerable as you age

I know you mentioned scams that target the elderly, and those are definitely a risk. I’ve heard about “lottery scams” that ask people to make a payment to collect “prizes,” as well as “phishing” emails that ask you to provide sensitive financial information. But I’ve also heard too many stories about older people being deceived by family members or new “love” interests. One friend’s niece manipulated her aunt into control of her life savings, and another’s father was convinced to rewrite his will, leaving everything to a young woman who stepped in to “help” him.

There are a number of reasons why older people are so susceptible. For starters, many people experience mental and physical challenges as they age, including cognitive impairment and declining health, which means they can become dependent on others or are no longer able to manage finances. The elderly have also often accumulated wealth and assets over a lifetime, which makes them prime targets for exploitation. And finally, our older population in the U.S. is growing at a faster rate than any other group, which means there are increasing numbers at risk. With the aging of the Baby Boomers, an average of 10,000 Americans turns 65 every day.1

Changing trends in retirement plans also put people at risk. It used to be that most Americans received retirement funds through defined benefit—or pension—plans, which someone else managed and doled out in small amounts throughout our retirement years. Now, most Americans including many elderly people have a defined contribution plan, such as a 401(k), which they manage themselves. I love 401(k)s but I also know that people who have them often receive the funds at the time they may be more susceptible to financial exploitation.

You can take steps now to help protect your future self

Regular readers of my column won’t be surprised by what I recommend to help safeguard yourself against financial exploitation: You need to talk with the people you love, as well as a trusted financial advisor, about your finances.

Start by organizing all the information on your accounts, properties, assets, and liabilities. Make sure your will is in order, as well as your beneficiary designations and advance care directives.

Then you’ll want to identify the people in your life who you think are trustworthy enough to help you if you’re no longer able to manage your finances. Such people could be a spouse, children, professional financial advisor, or close friends. You’ll want to grant someone power of attorney (POA), so that person can act in your place if you become incapacitated or unable to handle matters on your own. Be sure to talk to your attorney and loved ones about what powers they should have, when the POA goes into effect, and how long it will remain in effect. You should review these documents periodically to make sure they still coincide with your wishes.

After you’ve identified these people, have an honest conversation with them about your finances and your wishes for the future. I know that not everyone is comfortable talking about money, but this is really important. I’d recommend setting up a meeting that includes your financial advisor, estate attorney and your children (or other family members), so that everyone is on the same page and knows your wishes. The more people who are familiar with your financial situation, the more likely it is that someone can identify financial exploitation if it occurs.

Various securities regulators are taking steps to help protect seniors and other vulnerable people. In addition, brokers are now required to ask for the name of and contact information for a “trusted contact person” when opening new accounts, so they can reach out if they suspect potential financial exploitation. They can also place a temporary hold on disbursements when financial exploitation is suspected, or in certain other circumstances that may be necessary to help protect investors.3

Stay connected

One of the best ways to help protect yourself from financial exploitation is to stay connected to the people in your life. Scam artists often befriend lonely older people, only to take advantage of them.

If you are connected to friends and family, you’ll be a less attractive target. Stay in touch with children and siblings, and try to spend time with friends. I’d urge you to be especially wary of any new people who enter your life and want to be particularly close or try to separate you from family or lifelong friends. I know older people can feel particularly lonely and isolated after a death of a spouse and might long for company, but you should be very careful about people you meet on online dating sites.

Even though this is a growing problem, you really can take measures to help protect yourself—and speaking up is an important start. I’m so glad you raised this question. The more we talk about the problem of financial exploitation, the more we can help protect all seniors.

Have a personal finance question? Email us ataskcarrie@schwab.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries,contact Schwab.

The information provided here is for general informational purposes only and is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager.

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